# Petco Health & Wellness Company, Inc.: Form 10-Q for the period ended May 3, 2025

- Company: [Petco Health & Wellness Company, Inc.](/companies/woof.md) (CIK 1826470)
- Form: 10-Q
- Filed: 2025-06-06
- Accepted by EDGAR: Jun 6, 2025, 20:05 ET
- Period: 2025-05-03
- Accession: 0000950170-25-083057
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1826470/000095017025083057/woof-20250503.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1826470/000095017025083057/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-05-03.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-02-02 to 2025-05-03 | $1.49bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-02-02 to 2025-05-03 | $923.4m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-02-02 to 2025-05-03 | $570.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2025-02-02 to 2025-05-03 | $553.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-02-02 to 2025-05-03 | $16.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-02-02 to 2025-05-03 | $33.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2025-02-02 to 2025-05-03 | $495.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-02-02 to 2025-05-03 | −$11.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-02-02 to 2025-05-03 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-02-02 to 2025-05-03 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-02-02 to 2025-05-03 | 277,548,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-02-02 to 2025-05-03 | −$15.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-02-02 to 2025-05-03 | $28.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-05-03 | $133.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-05-03 | $920.4m | us-gaap:AssetsCurrent |
| Total assets | at 2025-05-03 | $5.12bn | us-gaap:Assets |
| Current liabilities | at 2025-05-03 | $1.08bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-05-03 | $4.01bn | us-gaap:Liabilities |
| Long-term debt | at 2025-05-03 | $1.58bn | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2025-05-03 | $1.11bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,424 characters.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), as well as the corresponding Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025 (the “2024 Form 10-K”). The discussion and analysis below contains certain forward-looking statements about our business and operations that are subject to the risks, uncertainties, and other factors referred to in Part II, Item 1A, “*Risk Factors”* of this Form 10-Q. These risks, uncertainties, and other factors could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. The risks described in this Form 10-Q and in other documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including the section entitled “Forward-Looking Statements” in this Form 10-Q, should be carefully reviewed. All amounts herein are unaudited.

### Overview

Petco Health and Wellness Company, Inc. (“Petco”, the “Company”, “we”, “our” and “us”) is a pet specialty retailer focused on improving the lives of pets, pet parents, and our own partners. Through our omnichannel ecosystem, we provide our customers with a comprehensive offering of products and services to fulfill all of their pets’ needs through our more than 1,500 pet care centers in the U.S., Mexico, and Puerto Rico, our digital channel, and our flexible fulfillment options.

Our multicategory strategy integrates our digital assets with our nationwide physical footprint to meet the needs of pet parents who are looking for a single source for all their pets’ needs. Petco.com, our e-commerce site, and the Petco app, our personalized mobile app, together serve as hubs for pet parents to book appointments and manage all of their pets’ needs, while enabling them to shop wherever, whenever, and however they want.

We strive to be a company that is improving millions of pet lives as well as the lives of pet parents and the partners who work for us. In tandem with Petco Love, an independent 501(c)(3) nonprofit organization, we work with and support thousands of local animal welfare groups across the country and, through these partnerships and in-store adoption events, we have helped find homes for approximately 7 million animals.

Macroeconomic factors, including interest rates, potential inflationary pressures, tariffs, and global economic and geopolitical developments have had varying impacts on our results of operations that are difficult to isolate and quantify. We cannot predict the duration or ultimate severity of these macroeconomic factors or the ultimate impact on our operations and liquidity. Please refer to the risk factors referred to in Part II, Item 1A, “*Risk Factors”* of this Form 10-Q.

### How We Assess the Performance of Our Business

In assessing our performance, we consider a variety of performance and financial measures, including the following:

### Comparable Sales

Comparable sales is an important measure throughout the retail industry and includes both retail and digital sales of products and services. A new location or digital site is included in comparable sales beginning on the first day of the fiscal month following 12 full fiscal months of operation and is subsequently compared to like time periods from the previous year. Relocated pet care centers become comparable pet care centers on the first day of operation if the original pet care center was open longer than 12 full fiscal months. If, during the period presented, a pet care center was closed, sales from that pet care center are included up to the first day of the month of closing. There may be variations in the way in which some of our competitors and other retailers calculate comparable sales. As a result, data in this filing regarding our comparable sales may not be comparable to similar data made available by other retailers.

Comparable sales allow us to evaluate how our overall ecosystem is performing by measuring the change in period-over-period net sales from locations and digital sites that have been open for the applicable period. We intend to improve comparable sales by continuing initiatives aimed to increase customer retention, frequency of visits, and basket size. General macroeconomic and retail business trends are also a key driver of changes in comparable sales.

### Non-GAAP Financial Measures

Management and our board of directors review, in addition to GAAP (as defined herein) measures, certain non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow, to evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. Further explanations of these non-GAAP measures, along with reconciliations to their most comparable GAAP measures, are presented below under “Reconciliation of Non-GAAP Financial Measures to GAAP Measures.”

### Executive Summary

Comparing the thirteen weeks ended May 3, 2025 with the thirteen weeks ended May 4, 2024 (unless otherwise noted), our results included the following:

- a decrease in net sales from $1.53 billion to $1.49 billion, representing a period-over-period decrease of 2.3%;
- operating income of $16.4 million, compared to an operating loss of $16.8 million in the prior year period;
- net loss attributable to Class A and B-1 common stockholders of $11.7 million, compared to net loss attributable to Class A and B-1 common stockholders of $46.5 million in the prior year period; and
- an increase in Adjusted EBITDA from $75.6 million to $89.4 million.

### Results of Operations

The following tables summarize our results of operations and the percent of net sales of line items included in our consolidated statements of operations (dollars in thousands):

| Net sales: | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Products | $1,241,891 | $1,279,731 |
| Services and other | 251,508 | 249,409 |
| Total net sales | 1,493,399 | 1,529,140 |
| Cost of sales: |  |  |
| Products | 766,285 | 792,722 |
| Services and other | 157,146 | 157,758 |
| Total cost of sales | 923,431 | 950,480 |
| Gross profit | 569,968 | 578,660 |
| Selling, general and administrative expenses | 553,609 | 595,442 |
| Operating income (loss) | 16,359 | (16,782) |
| Interest income | (1,359) | (418) |
| Interest expense | 33,494 | 36,817 |
| Other non-operating loss | — | 2,665 |
| Loss before income taxes and income from equity method investees | (15,776) | (55,846) |
| Income tax expense (benefit) | 495 | (4,477) |
| Income from equity method investees | (4,610) | (4,886) |
| Net loss attributable to Class A and B-1 common stockholders | $(11,661) | $(46,483) |

| Net sales: | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Products | 83.2% | 83.7% |
| Services and other | 16.8 | 16.3 |
| Total net sales | 100.0 | 100.0 |
| Cost of sales: |  |  |
| Products | 51.3 | 51.9 |
| Services and other | 10.5 | 10.3 |
| Total cost of sales | 61.8 | 62.2 |
| Gross profit | 38.2 | 37.8 |
| Selling, general and administrative expenses | 37.1 | 38.9 |
| Operating income (loss) | 1.1 | (1.1) |
| Interest income | (0.1) | (0.0) |
| Interest expense | 2.3 | 2.4 |
| Other non-operating loss | — | 0.2 |
| Loss before income taxes and income from equity method investees | (1.1) | (3.7) |
| Income tax expense (benefit) | 0.0 | (0.4) |
| Income from equity method investees | (0.3) | (0.3) |
| Net loss attributable to Class A and B-1 common stockholders | (0.8)% | (3.0)% |

16

| Operational Data: | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Comparable sales change | (1.3)% | (1.2)% |
| Total pet care centers (U.S. and Puerto Rico) at end of period | 1,393 | 1,423 |
| Adjusted EBITDA (in thousands) | $89,449 | $75,644 |

### Thirteen Weeks Ended May 3, 2025 Compared with Thirteen Weeks Ended May 4, 2024

### Net Sales and Comparable Sales

*(dollars in thousands)*

|  | Thirteen weeks ended May 3, 2025 | May 4, 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Consumables | $748,070 | $763,974 | $(15,904) | (2.1%) |
| Supplies and companion animals | 493,821 | 515,757 | (21,936) | (4.3%) |
| Services and other | 251,508 | 249,409 | 2,099 | 0.8% |
| Net sales | $1,493,399 | $1,529,140 | $(35,741) | (2.3%) |

Net sales decreased $35.7 million, or 2.3%, to $1.49 billion in the thirteen weeks ended May 3, 2025 compared to net sales of $1.53 billion in the thirteen weeks ended May 4, 2024. The sales decrease primarily reflects lower transaction volume and a lower pet care center count, as well as a greater focus on profitability and margin. We continue to experience momentum in services, driven in part by our strategic investments in customer acquisition and retention, as well as efforts to optimize our existing veterinary hospital footprint.

We are unable to quantify certain factors impacting sales described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.

### Gross Profit

As a percentage of net sales, our gross profit rate was 38.2% for the thirteen weeks ended May 3, 2025 compared with 37.8% for the thirteen weeks ended May 4, 2024. The increase was primarily due to improved utilization of our services footprint, effective inventory management, supply chain optimization efforts, and channel mix impacts. We are unable to quantify the factors impacting gross profit rate described above due to the fact that such factors are based on input measures or qualitative information that do not lend themselves to quantification.

### Selling, General and Administrative (“SG&A”) Expenses

As a percentage of net sales, SG&A expenses were 37.1% for the thirteen weeks ended May 3, 2025 compared with 38.9% for the thirteen weeks ended May 4, 2024. The decrease in SG&A expenses period-over-period included lower payroll and other compensation costs, advertising expenses, and store occupancy costs. In addition, the Company incurred disposition costs relating to its Pupbox business during the thirteen weeks ended May 4, 2024.

### Interest Expense

Interest expense decreased $3.3 million, or 9.0%, to $33.5 million in the thirteen weeks ended May 3, 2025 compared with $36.8 million in the thirteen weeks ended May 4, 2024. The decrease was primarily driven by lower interest rates on the First Lien Term Loan during the thirteen weeks ended May 3, 2025. For more information refer to Note 4, “*Senior Secured Credit Facilities,”* to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

### Other Non-Operating Loss

There was no other non-operating income or loss recognized during the thirteen weeks ended May 3, 2025. Other non-operating loss was $2.7 million for the thirteen weeks ended May 4, 2024. For more information, refer to Note 6, “*Fair Value Measurements,”* to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

### Income Tax Expense (Benefit)

Our effective tax rate was (4.5%) resulting in income tax expense of $0.5 million for the thirteen weeks ended May 3, 2025, compared to an effective tax rate of 9.1% resulting in income tax benefit of $4.5 million for the thirteen weeks ended May 4, 2024. The change in effective tax rate for the thirteen weeks ended May 3, 2025 is primarily driven by a reduction of equity-based compensation not expected to be deductible for tax purposes, along with a change in pre-tax earnings.

### Reconciliation of Non-GAAP Financial Measures to GAAP Measures

The following information provides definitions and reconciliations of certain non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Such non-GAAP financial measures are not calculated in accordance with GAAP and should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the most comparable GAAP measures. The non-GAAP financial measures presented may differ from similarly-titled measures used by other companies.

### Adjusted EBITDA

We present Adjusted EBITDA, a non-GAAP financial measure, because we believe it enhances an investor’s understanding of our financial and operational performance by excluding certain material non-cash items, unusual or non-recurring items that we do not expect to continue in the future, and certain other adjustments we believe are or are not reflective of our ongoing operations and performance. Adjusted EBITDA enables operating performance to be reviewed across reporting periods on a consistent basis. We use Adjusted EBITDA as one of the principal measures to evaluate and monitor our operating financial performance and to compare our performance to others in our industry. We also use Adjusted EBITDA in connection with establishing discretionary annual incentive compensation targets, to make budgeting decisions, to make strategic decisions regarding the allocation of capital, and to report our quarterly results as defined in our debt agreements, although under such agreements the measure is calculated differently and is used for different purposes.

Adjusted EBITDA is not a substitute for net loss, the most comparable GAAP measure, and is subject to a number of limitations as a financial measure, so it should be used in conjunction with GAAP financial measures and not in isolation. There can be no assurances that we will not modify the presentation of Adjusted EBITDA in the future. In addition, other companies in our industry may define Adjusted EBITDA differently, limiting its usefulness as a comparative measure. Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reconciliation of Non-GAAP Financial Measures to GAAP Measures” included in the 2024 Form 10-K for more information regarding how we define Adjusted EBITDA.

The table below reflects the calculation of Adjusted EBITDA and Adjusted EBITDA Margin for the periods presented:

*(dollars in thousands)*

|  | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Net loss attributable to Class A and B-1 common stockholders | $(11,661) | $(46,483) |
| Interest expense, net | 32,135 | 36,399 |
| Income tax expense (benefit) | 495 | (4,477) |
| Depreciation and amortization | 49,365 | 49,587 |
| Income from equity method investees | (4,610) | (4,886) |
| Asset impairments and write offs | 446 | 3,508 |
| Equity-based compensation | 9,420 | 17,434 |
| Other non-operating loss | — | 2,665 |
| Mexico joint venture EBITDA (1) | 10,198 | 10,496 |
| Acquisition and divestiture-related costs (2) | — | 3,719 |
| Other costs (3) | 3,661 | 7,682 |
| Adjusted EBITDA | $89,449 | $75,644 |
| Net sales | $1,493,399 | $1,529,140 |
| Net margin (4) | (0.8)% | (3.0)% |
| Adjusted EBITDA Margin | 6.0% | 4.9% |

(1) Mexico joint venture EBITDA represents 50% of the entity’s operating results for the periods presented, as adjusted to reflect the results on a basis comparable to our Adjusted EBITDA. In the financial statements, this joint venture is accounted for as an equity method investment and reported net of depreciation and income taxes. Because such a presentation would not reflect the adjustments made in our calculation of Adjusted EBITDA, we include our 50% interest in our Mexico joint venture on an Adjusted EBITDA basis to ensure consistency. The table below presents a reconciliation of Mexico joint venture net income to Mexico joint venture EBITDA:

*(dollars in thousands)*

|  | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Net income | $9,220 | $9,555 |
| Depreciation | 6,597 | 6,948 |
| Income tax expense | 4,166 | 3,456 |
| Foreign currency (gain) loss | (292) | 479 |
| Interest expense, net | 704 | 553 |
| EBITDA | $20,395 | $20,991 |
| 50% of EBITDA | $10,198 | $10,496 |

(2) Acquisition and divestiture-related costs include direct costs resulting from acquiring, integrating, or divesting businesses. These include third-party professional and legal fees, losses on sales of divestitures, and other integration-related costs that would not have otherwise been incurred as part of the Company's operations.

(3) Other costs include, as incurred: restructuring costs and restructuring-related severance costs; legal reserves associated with significant, non-ordinary course legal or regulatory matters; and costs related to certain significant strategic transactions.

(4) We define net margin as net loss attributable to Class A and B-1 common stockholders divided by net sales and Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

### Free Cash Flow

Free Cash Flow is a non-GAAP financial measure that is calculated as net cash provided by operating activities less cash paid for fixed assets. Management believes that Free Cash Flow, which measures our ability to generate additional cash from our business operations, is an important financial measure for use in evaluating the Company’s financial performance.

The table below reflects the calculation of Free Cash Flow for the periods presented:

*(dollars in thousands)*

|  | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(15,454) | $(8,414) |
| Cash paid for fixed assets | (28,412) | (32,641) |
| Free Cash Flow | $(43,866) | $(41,055) |

### Liquidity and Capital Resources

### Overview

Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $581.0 million ABL Revolving Credit Facility. Our ability to fund our operations, to make planned capital investments, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control. Our liquidity as of May 3, 2025 was $647.9 million, inclusive of cash and cash equivalents of $133.3 million and $514.6 million of availability on the ABL Revolving Credit Facility.

We are a party to contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under the ABL Revolving Credit Facility will be sufficient to finance our operations, meet our current cash requirements, and fund anticipated capital investments for at least the next 12 months. We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on favorable terms, or at all.

### Cash Flows

The following table summarizes our consolidated cash flows:

*(dollars in thousands)*

| Total cash used in: | Thirteen weeks ended May 3, 2025 | May 4, 2024 |
| --- | ---: | ---: |
| Operating activities | $(15,454) | $(8,414) |
| Investing activities | (27,133) | (31,743) |
| Financing activities | (334) | (5,628) |
| Net decrease in cash, cash equivalents and restricted cash | $(42,921) | $(45,785) |

### Operating Activities

Our primary source of operating cash is sales of products and services to customers, which are substantially all on a cash basis, and therefore provide us with a significant source of liquidity. Our primary uses of cash in operating activities include: purchases of inventory; freight and warehousing costs; employee-related expenditures; occupancy-related costs for our pet care centers, distribution centers and corporate support centers; credit card fees; interest under our debt agreements; and marketing expenses. Net cash used in operating activities is impacted by our net loss adjusted for certain non-cash items, including: depreciation, amortization, impairments and write-offs; amortization of debt discounts and issuance costs; deferred income taxes; equity-based compensation; impairments of goodwill and intangible assets; other non-operating loss; and the effect of changes in operating assets and liabilities.

Net cash used in operating activities was $15.5 million in the thirteen weeks ended May 3, 2025 compared with net cash used in operating activities of $8.4 million in the thirteen weeks ended May 4, 2024. The increase in net cash outflows was primarily driven by lower sales and higher payouts of prior year accrued incentive bonuses. This was partially offset by a decrease in inventory purchases and lower payroll and fringe benefits.

### Investing Activities

Cash used in investing activities was $27.1 million and $31.7 million for the thirteen weeks ended May 3, 2025 and May 4, 2024, respectively. This decrease was primarily driven by reductions in new pet care centers and hospitals.

### Financing Activities

Net cash used in financing activities was $0.3 million for the thirteen weeks ended May 3, 2025, compared with $5.6 million used in financing activities in the thirteen weeks ended May 4, 2024. This decrease was primarily driven by less cash paid for tax withholdings on equity-based awards during the thirteen weeks ended May 3, 2025 and debt refinancing costs paid during the thirteen weeks ended May 4, 2024.

### Sources of Liquidity

### Senior Secured Credit Facilities

The Company has a secured term loan facility maturing on March 4, 2028 (the “First Lien Term Loan”) and a secured asset-based revolving credit facility with availability of up to $581.0 million, subject to a borrowing base (as amended from time to time, the “ABL Revolving Credit Facility”). The first tranche of the ABL Revolving Credit Facility has availability of up to $35.0 million, subject to a borrowing base, maturing on March 4, 2026. The second tranche has availability of up to $546.0 million, subject to a borrowing base, maturing on March 29, 2029.

For more information regarding this indebtedness, refer to Note 4, “*Senior Secured Credit Facilities,”* to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

### Derivative Instruments

The Company has entered into interest rate cap, collar and swap agreements to limit the maximum interest on a portion of the Company’s variable-rate debt and decrease its exposure to interest rate variability relating to three-month Term SOFR. For more information regarding derivative instruments, refer to Note 5, “*Derivative Instruments,”* to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

### Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make assumptions and estimates about future results and apply judgments that affect the reported amounts of assets, liabilities, net sales, expenses and related disclosures. We base our estimates and judgments on historical experience, current trends and other factors that we believe to be relevant at the time our consolidated financial statements are prepared. On an ongoing basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in the 2024 Form 10-K.

### Recent Accounting Pronouncements

Refer to Note 1, “*Summary of Significant Accounting Policies,”* to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for information regarding recently issued accounting pronouncements.

## Market risk

As filed, 2,631 characters.

We are subject to market risks arising from transactions in the normal course of our business. These risks are primarily associated with interest rate fluctuations, as well as changes in our credit standing, based on the capital and credit markets, which are not predictable. We do not currently hold any instruments for trading purposes.

### Interest Rate Risk

We are subject to interest rate risk in connection with the First Lien Term Loan and the ABL Revolving Credit Facility. As of May 3, 2025, we had $1,595.3 million outstanding under the First Lien Term Loan and no amounts outstanding under the ABL Revolving Credit Facility. The First Lien Term Loan and the ABL Revolving Credit Facility each bear interest at variable rates. An increase of 100 basis points in the variable rates on the First Lien Term Loan and the ABL Revolving Credit Facility as of May 3, 2025 would have increased gross annual cash interest in the aggregate by approximately $16.2 million. Additionally, we entered into cash flow hedges to limit the maximum interest rate on a portion of our variable-rate debt and limit our exposure to interest rate variability, refer to Note 5, “*Derivative Instruments,”* to the Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

We cannot predict market fluctuations in interest rates and their impact on our debt, nor can there be any assurance that long-term fixed-rate debt will be available at favorable rates, if at all. Consequently, future results may differ materially from estimated results due to adverse changes in interest rates or debt availability.

### Credit Risk

As of May 3, 2025, our cash and cash equivalents were maintained at major financial institutions in the United States, and our current deposits are likely in excess of insured limits. We believe these institutions have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us.

### Foreign Currency Risk

Substantially all of our business is currently conducted in U.S. dollars, with a small amount denominated in foreign currencies. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations. Our results of current and future operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. We do not enter into forward currency contracts to hedge our foreign currency exposure. A hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material effect on our operating results.

## Controls and procedures

As filed, 2,163 characters.

### Management’s Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this Form 10-Q, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of May 3, 2025.

### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended May 3, 2025, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on the Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

## Risk factors

As filed, 665 characters.

Reference is made to Part I, Item 1A, “*Risk Factors”* included in the 2024 Form 10-K for information concerning risk factors. There have been no material changes with respect to the risk factors disclosed in the 2024 Form 10-K. You should carefully consider such factors, which could materially and adversely affect our business, financial condition, and/or results of operations. The risks described in the 2024 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition, and/or results of operations.

Filed Jun 6, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-083057. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.